Chaos Theory

This post-election period has been a sublime frottathon for game theorists.

For my own part, two statements I’ve made over the last few days:

Friday:

The pressure will be on, though, for something to be in place before the markets open on Monday morning. The Pound is down against the Euro(!) and things aren’t going to be pretty if we still don’t know by Monday morning.

I was wrong about that. The rescue deal for the Euro pulled off last night gave rise to a rally of markets worldwide.

Tomorrow, though, is another day. As Brown made this evening’s announcement, the Pound took a hit.

17:41 "A Lib-Lab coalition would be a big negative for sterling," Ian Stannard at BNP Paribas says. "The Government will be unstable and not have the ability to drive through the cuts required."

17:30 Pound is now at $1.4866 against the dollar, compared to $1.5056 earlier in the afternoon. Still falling too.

17:23 Euro has risen by more than half a cent against the pound following Brown’s statement. Markets really spooked by prospect of more uncertainty.

17:14 Reaction to Brown’s statement and subsequent fall in pound from Jeremy Cook, chief economist at World First:

It’s pretty clear that the market wants certainty and that the news that Clegg is dilly-dallying between Labour and the Conservatives have not gone down well. I’m surprised that the markets haven’t hit sterling hard today, the EU plan has taken a bullet for us. As soon as that become old news however sterling is once again in the firing line.

Now, something I said yesterday:

This leads us to a nightmare scenario – albeit a remote one. But we are in uncharted waters, with some of the most calculating and devious bastards in history squabbling for the helm of the vessel.

Others have written that a Lib/Lab coalition with Brown, or A N Other unelected leader, would so enrage the electorate that they could never win a referendum on voting reform and would thereafter be savaged at the next general election.

So, suppose the Lib Dems went into a coalition with Labour, Postman Pat installed at the helm.

They all want PR. Once they have it, their ‘progressive consensus’ will be de-facto obtained.

If they don’t need a referendum, why on earth would they hold one? Remember the Lisbon treaty?

Okay, I was wide of the mark with PR – Brown appears to be offering AV without a referendum. But Brown going as part of the deal? Hmm. Suits me, sir.

I don’t know if it’s any comfort that Tom Harris says the Labour MPs won’t let that through the commons. It’s perhaps a mark of how little influence Tom has in his party that he makes this point, addressed directly to senior Lib Dems, on his blog. His frankness is refreshing nevertheless.

So on his way out, Brown has thrown a spanner in the works that will almost certainly have a negative impact on the markets.

I wonder if I’ll ever get another chance to use this:

Just be gone, you psychotic, monocular luntatic.

AJ

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